There is no doubt that, over the past year, trade officials in WTO Members have spent countless hours agonizing over the appropriate response to Trump’s national security tariffs on steel and aluminium. They have come up with a number of options: negotiating voluntary export restraints, imposing unilateral retaliation, treating the measures as safeguards, and bringing WTO disputes. Each of these options has its own combination of advantages and drawbacks: VERs have the advantage of keeping (some) trade flowing, but they represent a surrender to US demands and set a trade-restrictive and WTO-illegal precedent for the settlement of future disputes; imposing unilateral retaliation is a fast and hard response that makes the use of national security measures economically (and politically) painful for the imposing country, but it also hurts the retaliating countries’ economy and represents a further step out of the rules-based trading regime. Bringing WTO disputes superficially reinforces the rule of law in international trade, but actually has the potential to undermine it even further: whatever a panel decides on the question of the justiciability of the GATT Art. XXI exception will be deeply problematic for many WTO Members. WTO dispute settlement proceedings also take a long time, which is why many Members have imposed unilateral retaliation while they wait for their dispute to run its course.

However, there is an option for responding to national security measures that avoids many of the drawbacks of the courses of action that WTO Members have actually chosen: bringing pure non-violation complaints. Pure non-violation complaints are superior to violation complaints and unilateral retaliation for at least five reasons:

1. The complainant can’t lose

Non-violation complaints are failsafe: almost by definition, trade measures imposed for national security reasons will nullify or impair benefits under the GATT 1994 or the GATS. The only question that needs to be settled in dispute settlement is the amount of the nullification or impairment, which will determine the amount of compensation to which the complaining member will be entitled as part of a “mutually satisfactory adjustment”. By contrast, bringing a violation complaint against a national security measure might result in a finding that the measure is saved by the national security exception, in which case the complainant is left with no recourse.

2. The complainant should get a ruling fast

Non-violation complaints should be much faster to adjudicate than violation complaints: since there is no assessment of the legality of the measures adopted by the respondent, the only issue on which a panel will have to rule is the question of whether benefits accruing to the complainant have been nullified or impaired by the respondent. The appeal stage could be avoided altogether (presuming a minimum of good faith on the part of the respondent). Similarly, there would be no need for compliance proceedings; pursuant to DSU Art. 26.1(c), the only remaining stage would be Article 21.3(c) proceedings to determine the level of nullification or impairment (and potentially Art. 22 proceedings regarding the amount and form of retaliation).

3. The complainant doesn’t upset anyone

Bringing a violation complaint against another Member’s national security measure will inevitably be perceived as confrontational: such a complaint necessarily implies an accusation that the respondent has not adopted the measure in good faith. By contrast, a non-violation complaint is merely an attempt to restore the balance of concessions that existed before the national security measures were imposed, while respecting the national security determination made by the respondent. In fact, the US has admitted that non-violation complaints remain available for national security measures.

4. The complainant preserves the rules-based trading system

There are good reasons why the national security exception has not been litigated to date: everyone knows that the result will be explosive, in one way or another. If the panel decides to review the national security rationale provided by the respondent, many WTO Members will find it to be an unacceptable intrusion into their sovereignty. On the other hand, if the panel decides that the national security exception is non-justiciable, it will give carte blanche to WTO Members to impose measures on national security grounds and thereby shield them from WTO challenges. A non-violation complaint sidesteps these highly charged questions entirely: It allows WTO members to address their conflicts using WTO procedures and thereby reinforces the rules-based trading system without burdening panels with legal questions for which there are no good responses.

5. The complaint focuses on what really matters

One could argue that the question of whether a national security measure is WTO-legal or illegal is beside the point: a Member who imposes a measure for national security reasons is unlikely to remove the measure because the WTO DSB recommended that it do so. Given that withdrawal of the measure is not a realistic outcome of WTO proceedings, the only benefit of such proceedings is an authoritative assessment of the amount of compensation to which the complainant is entitled or the retaliation that the complainant can implement, which corresponds to the amount of nullification or impairment. If that is the case, why not go straight to the question of nullification or impairment of benefits by bringing a pure non-violation complaint?

Comments

There is no doubt that, over the past year, trade officials in WTO Members have spent countless hours agonizing over the appropriate response to Trump’s national security tariffs on steel and aluminium. They have come up with a number of options: negotiating voluntary export restraints, imposing unilateral retaliation, treating the measures as safeguards, and bringing WTO disputes. Each of these options has its own combination of advantages and drawbacks: VERs have the advantage of keeping (some) trade flowing, but they represent a surrender to US demands and set a trade-restrictive and WTO-illegal precedent for the settlement of future disputes; imposing unilateral retaliation is a fast and hard response that makes the use of national security measures economically (and politically) painful for the imposing country, but it also hurts the retaliating countries’ economy and represents a further step out of the rules-based trading regime. Bringing WTO disputes superficially reinforces the rule of law in international trade, but actually has the potential to undermine it even further: whatever a panel decides on the question of the justiciability of the GATT Art. XXI exception will be deeply problematic for many WTO Members. WTO dispute settlement proceedings also take a long time, which is why many Members have imposed unilateral retaliation while they wait for their dispute to run its course.

However, there is an option for responding to national security measures that avoids many of the drawbacks of the courses of action that WTO Members have actually chosen: bringing pure non-violation complaints. Pure non-violation complaints are superior to violation complaints and unilateral retaliation for at least five reasons:

1. The complainant can’t lose

Non-violation complaints are failsafe: almost by definition, trade measures imposed for national security reasons will nullify or impair benefits under the GATT 1994 or the GATS. The only question that needs to be settled in dispute settlement is the amount of the nullification or impairment, which will determine the amount of compensation to which the complaining member will be entitled as part of a “mutually satisfactory adjustment”. By contrast, bringing a violation complaint against a national security measure might result in a finding that the measure is saved by the national security exception, in which case the complainant is left with no recourse.

2. The complainant should get a ruling fast

Non-violation complaints should be much faster to adjudicate than violation complaints: since there is no assessment of the legality of the measures adopted by the respondent, the only issue on which a panel will have to rule is the question of whether benefits accruing to the complainant have been nullified or impaired by the respondent. The appeal stage could be avoided altogether (presuming a minimum of good faith on the part of the respondent). Similarly, there would be no need for compliance proceedings; pursuant to DSU Art. 26.1(c), the only remaining stage would be Article 21.3(c) proceedings to determine the level of nullification or impairment (and potentially Art. 22 proceedings regarding the amount and form of retaliation).

3. The complainant doesn’t upset anyone

Bringing a violation complaint against another Member’s national security measure will inevitably be perceived as confrontational: such a complaint necessarily implies an accusation that the respondent has not adopted the measure in good faith. By contrast, a non-violation complaint is merely an attempt to restore the balance of concessions that existed before the national security measures were imposed, while respecting the national security determination made by the respondent. In fact, the US has admitted that non-violation complaints remain available for national security measures.

4. The complainant preserves the rules-based trading system

There are good reasons why the national security exception has not been litigated to date: everyone knows that the result will be explosive, in one way or another. If the panel decides to review the national security rationale provided by the respondent, many WTO Members will find it to be an unacceptable intrusion into their sovereignty. On the other hand, if the panel decides that the national security exception is non-justiciable, it will give carte blanche to WTO Members to impose measures on national security grounds and thereby shield them from WTO challenges. A non-violation complaint sidesteps these highly charged questions entirely: It allows WTO members to address their conflicts using WTO procedures and thereby reinforces the rules-based trading system without burdening panels with legal questions for which there are no good responses.

5. The complaint focuses on what really matters

One could argue that the question of whether a national security measure is WTO-legal or illegal is beside the point: a Member who imposes a measure for national security reasons is unlikely to remove the measure because the WTO DSB recommended that it do so. Given that withdrawal of the measure is not a realistic outcome of WTO proceedings, the only benefit of such proceedings is an authoritative assessment of the amount of compensation to which the complainant is entitled or the retaliation that the complainant can implement, which corresponds to the amount of nullification or impairment. If that is the case, why not go straight to the question of nullification or impairment of benefits by bringing a pure non-violation complaint?